In the Matter of )
)
TIME WARNER CABLE, )
A Division of )
TIME WARNER )
ENTERTAINMENT COMPANY, L.P. )
)
Emergency Petition for )
Declaratory Ruling and Enforcement Order )
For Violation of Section 76.58 of the )
Commission's Rules, or in the Alternative )
For Immediate Injunctive Relief )
To: The Commission
OPPOSITION TO "EMERGENCY PETITION FOR DECLARATORY RULING AND
ENFORCEMENT ORDER, OR, IN THE ALTERNATIVE, FOR IMMEDIATE
INJUNCTIVE RELIEF"
Time Warner Cable ("Time Warner"), by its attorneys, hereby submits this opposition to
the "Emergency Petition for Declaratory Ruling and Enforcement Order, Or, In the Alternative,
For Immediate Injunctive Relief" ("Petition") filed with the Commission by ABC, Inc. ("ABC")
on May 1, 2000. For the reasons set forth below, ABC's Petition must be denied.
INTRODUCTION
ABC, a company ultimately controlled by The Walt Disney Company ("Disney"), is the
ultimate controlling parent of various televisions broadcast stations (the "ABC O&O Stations").
ABC is seeking to compel Time Warner to violate Section 325(b)(1) of the Communications Act
of 1934, as amended (the "Act"), 47 U.S.C. 325(b)(1), by retransmitting various ABC O&O
Stations on Time Warner cable systems operating in designated market areas ("DMAs") where
such stations are located, without the benefit of a valid retransmission consent agreement
between ABC and Time Warner. As will be shown below in Sections II and III, Section 614
(b)(9) of the Act does not override the prohibition in Section 325(b)(1) against retransmission of
a broadcast station without an express agreement between the parties. Section 614 (b)(9)
restricts the deletion or repositioning of must-carry stations during national audience survey, or
"sweeps" periods. To the extent that provision applies at all to a station that has elected
retransmission consent, it certainly does not apply after the expiration of the parties'
retransmission consent agreement, as is the case here.
ABC's Petition would have the Commission believe that Time Warner "cynically"
plotted out a scheme to put itself in the position of having no agreement to continue carriage of
ABC's O&O Stations during the May Nielsen audience sweeps period. In fact, of course, it was
ABC that insisted on setting May 1 as the date on which the retransmission consent agreement
between the parties would expire. And it was ABC that repeatedly refused Time Warner's
entreaties that the parties enter into a retransmission consent agreement that would have ensured
Time Warner's right to carry ABC stations for the rest of the year, thereby guaranteeing the
public's access to those stations and giving the parties a realistic opportunity to work out a long-
term agreement. Indeed, ABC's hypocrisy is on full display in its Petition, which makes
abundantly clear that ABC's so-called "unconditional" grant of retransmission consent lasts only
until the end of sweeps, after which time ABC apparently is unconcerned about the impact that
its decision to deny Time Warner the right to carry ABC O&O Stations will have on its viewers.
ABC waived its ability to compel carriage of the ABC O&O Stations on or about
September 10, 1999 when such stations elected retransmission consent instead of must carry.
Similarly, ABC waived the ability to assure carriage of the ABC O&O Stations through the May
sweeps period when ABC itself proposed, only a month before, that the current retransmission
consent agreement would expire at 12:01 am on May 1. Moreover, the relief sought by ABC is
entirely within its own control. On April 19 and again on April 26, Time Warner extended ABC
a written offer to enter into an agreement that would give Time Warner retransmission consent
until January 1, 2000.
Throughout these negotiations, Time Warner has remained devoted to the principle of
retaining the ability of its subscribers to receive the ABC O&O Stations, while resisting ABC's
gamesmanship tactics. As demonstration of its commitment to put the public ahead of private
commercial disputes, today Time Warner offered to ABC that the parties reinstate their former
retransmission consent agreement for a period of anywhere from as long as ten years to as short
as five-and-one-half months, at ABC's election. (Exhibit C). By signing Time Warner's
retransmission consent proposal, ABC is in a position to restore Time Warner's ability to carry
the ABC O&O Stations that ABC forced off of Time Warner's cable systems at 12:01 am,
May 1.
BACKGROUND
In order to view this matter in its proper perspective, it is necessary to briefly outline the
factual developments which have led ABC to deny Time Warner's cable subscribers access to
popular ABC television stations. For the period October 6, 1993 through December 31, 1999,
ABC's ABC O&O Stations were carried by Time Warner cable systems pursuant to a
retransmission consent agreement between ABC and Time Warner dated August 9, 1993.
(Exhibit D).
On or about September 10, 1999, various ABC O&O Stations exercised their right to
elect between must-carry and retransmission consent for the upcoming three year period
(January 1, 2000 through December 31, 2002) by electing retransmission consent. Time Warner
and ABC engaged in serious negotiations prior to December 31, 1999, and were close to
agreement on the substantive terms of a new retransmission consent deal. However, because a
binding contract had not been finalized, the parties agreed to a short-term extension of the
previous retransmission consent agreement, through January 15, 2000. (Exhibit E).
By early January, Time Warner and ABC had reached an agreement on the key terms of a
new, three-year retransmission consent contract. On January 10, 2000, however, the Time
Warner/AOL merger was announced, and ABC's negotiation posture suddenly changed. ABC
abruptly pulled its previous offer off the table, even though that offer had been accepted
conceptually by Time Warner. Sensing that it could threaten opposition to the AOL/Time
Warner merger to gain leverage in its retransmission consent negotiations, ABC has continued to
up the ante with a succession of unreasonable demands. These demands would result in Time
Warner incurring hundreds of millions of dollars in additional costs which would, almost
certainly, result in higher rates for its customers. In addition, Disney and ABC have mounted an
extensive public relations campaign against Time Warner to elicit more money and better
channel positions for various Disney channels: ESPN, ESPN2, Lifetime, The Disney Channel,
Toon Disney, and SoapNet, all linked to Time Warner's continued carriage of the ABC O&O
Stations.
While the negotiations surrounding ABC's ever-escalating demands have ensued, Time
Warner and its subscribers have remained at the mercy of ABC's willingness to offer only short-
term agreements for mutually acceptable extensions of the prior retransmission consent
agreement. Notably, throughout this period beginning on January 1, 2000, ABC has never
offered to agree to an extension of the retransmission consent contract greater than one month.
Subsequent to ABC's proposal of an initial short-term, 15 day extension (through January 15,
2000), a second extension was proposed by ABC for an additional month, through February 15,
2000. (Exhibit F). Facing the expiration of the agreement in the midst of the February audience
sweeps, yet another short-term extension was then proposed by ABC, this time again for only 15
days, running through March 1, 2000, thereby assuring ABC that the ABC O&O Stations would
continue to be carried through the end of the February sweeps. (Exhibits G and H). Just prior to
the expiration of that extension, however, ABC employed a negotiation gambit designed to
further leverage its undue bargaining power. ABC offered to enter into an additional one month
extension of the agreement (through March 31, 2000) for all of the ABC O&O Stations, with the
exception of one: Houston. (Exhibit I).
In Houston, ABC understood that the relatively flat terrain would allow television
viewers to readily pick up ABC's local station with an off-air antenna, even if the station were
no longer carried by Time Warner. Thus, ABC concluded that it had the least to lose by playing
hard ball in Houston. Accordingly, ABC offered only a one day extension in Houston, instead of
the one month extension proposed to for all the other ABC O&O Stations. After that, ABC
proposed an amendment extending the retransmission consent agreement for a mere additional
week, hoping to force Time Warner to accept ABC's unreasonable proposals to drive up the cost
of numerous Disney programming services. (Exhibit J).
Time Warner declined to buckle under ABC's strong-arm tactics. As that expiration
deadline became imminent, ABC turned up the pressure by offering only an additional 12 hour
extension. (Exhibit K). Again, Time Warner refused to blink, and the parties agreed to another
short-term extension of the retransmission consent agreement for Houston through March 31,
bringing it back into sync with the retransmission agreements covering the other ABC O&O
Stations. (Exhibit L). When that agreement was about to expire, ABC offered yet another
proposed short-term extension of the retransmission consent agreement, covering all the ABC
O&O Stations, through one minute after midnight on April 30, 2000. (Exhibit M). Thus, it was
at ABC's initiative that this last extension was set to expire at 12:01 am, on May 1, after the May
sweeps period had already begun.
Each of the "fire drill" short-term extensions insisted upon by ABC has imposed
considerable burdens on Time Warner and its customers. Every time a retransmission consent
expiration deadline approaches, Time Warner personnel have been forced to divert their
attention from their substantial day-to-day responsibilities associated with the operation of Time
Warner's cable business, thus interfering with Time Warner's ability to operate its business and
provide optimal service to its customers. Instead, Time Warner employees have had to focus on
preparations for the fallout that would result from ABC's pulling its O&O Stations. Such
diversions include gearing up the customer service operations in order to respond to the
anticipated deluge of customer questions seeking an explanation for ABC's anti-consumer
actions, and arranging for substitute programming. Similarly, throughout this four-month period
since January 1, Time Warner personnel have devoted extraordinary efforts to remain in
compliance with Section 76.309(c)(3)(i)(B) of the Commission's rules, which requires that
customers will be notified of any changes in rates, programming
services or channel positions as soon as possible through
announcements on the cable system and in writing. Notice must
be given to subscribers a minimum of thirty (30) days in advance
of such changes if the change is within the control of the cable
operator.
The posting of repeated messages regarding the potential imminent loss of ABC O&O
Stations, followed by an eleventh-hour agreement regarding continued short-term availability of
such stations has not only been extremely burdensome for Time Warner, it also has resulted in
great consumer concern and confusion. It has left many Time Warner subscribers wondering
whether popular programs they desire will be denied to them by ABC. Indeed, ABC has taken
advantage of this uncertainty by running advertisements in Houston that offered Time Warner
customers financial incentives to switch to competing, direct-to-home satellite services.
Given the massive disruption and confusion surrounding these repeated short-term
retransmission consent extensions, on April 19 Time Warner proposed to ABC that any further
extension run at least through the end of the year, thus clearly informing ABC that it was no
longer willing to agree to any further month-to-month extensions. (Exhibit O). By extending
retransmission consent through the end of the year, the parties then would be able to devote their
full attention to business operations and customer service, while at the same time continue
negotiations towards achieving a global resolution of all the issues relating to Time Warner's
carriage of various ABC programming services, including the ABC O&O Stations. However,
they would not be continually diverted by the sword of Damocles atmosphere created by ABC's
tactic of relegating Time Warner to a tenant at sufferance. Time Warner requested a response to
its proposal by noon on Monday, April 24.
ABC failed to accept Time Warner's good faith suggestion of a reasonable cooling off
period by the Monday deadline. Instead, ABC again changed the terms of its substantive
proposal relating to the carriage of various ABC-controlled cable networks, and demanded a
quick answer. Time Warner delivered a substantive response to ABC's request on Wednesday,
April 26. At the same time, Time Warner renewed its offer to an extension of retransmission
consent running through the end of the year. (Exhibit A).
In a letter which was apparently being delivered to Time Warner contemporaneously
with Time Warner's April 26 correspondence to ABC described above, ABC tendered yet
another short-term retransmission consent agreement amendment offer to Time Warner, but this
time it was for even less than a month. (Exhibit P). Rather, the offer was for a mere 24 days,
expressly designed to extend through the May audience sweeps period. But at this point, ABC
had been placed on notice that such brinksmanship tactics would no longer be tolerated.
Indeed, on April 28, Time Warner responded to ABC's April 26 letter, again expressing
Time Warner's unwillingness to agree to further short-term extensions and urging ABC to avoid
viewer disruption by agreeing to a more rational extension through the end of the year:
Time Warner Cable believes that short-term retransmission consent agreements such as
the one you propose are counterproductive; they create continued and unnecessary
frustration and uncertainty on the part of our customers - - your viewers. It was for this
reason that our April 26th offer to ABC (as well as our offer of April 19th) contemplated a
retransmission consent agreement that runs through the end of the year. This will
provide our customers and your viewers with the certainty they expect, and provide us
ample time to resolve our commercial differences.
We no longer feel it is appropriate or in the best interests of our customers for us to enter
into another short term agreement, and we again urge you to sign and return to us the
retransmission consent agreement we forwarded on April 26th. (Exhibit Q).
ABC's response to Time Warner's April 28 letter was received late that same day. In its
response, ABC asserted that its April 26 amendment proposal, which was clearly identified as
such and which provided (as had every prior extension proposal) a signature line for Time
Warner to acknowledge that the amendment was "Accepted and Agreed to," was not an
amendment proposal at all. Rather, ABC contended that the documents tendered Time Warner
on April 26 constituted a unilateral, "unconditional" grant of retransmission consent authority
through May 24, 2000. (Exhibit R).
On April 29, Time Warner replied to ABC's incredibly tortured assertion by noting that
ABC's claim that it had offered an "unconditional" extension of the terms and conditions of the
August 9, 1993 Retransmission Consent Agreement was unfounded, and that ABC's offer in fact
included terms and conditions unacceptable for Time Warner. (Exhibit S). Time Warner again
urged ABC to sign Time Warner's proposed agreement, thereby guaranteeing uninterrupted
carriage of the ABC O&O Stations by Time Warner cable systems through the end of the year.
On April 30, ABC tendered its "unconditional and unequivocal consent to retransmit the
broadcast signals transmitted by ABC owned-and-operated stations through May 24, 2000,
regardless of any extension of the retransmission consent agreement." (Exhibit T). In other
words, ABC proposed to allow the preexisting retransmission consent agreement to expire, and
offered instead its unilateral "grant" of retransmission consent.
Time Warner promptly replied later that same day, again pointing out that ABC's
proposal was not unconditional; to the contrary, ABC continued to insist that any such consent
be for an extremely limited period, expiring at the end of the May sweeps (May 24), a condition
that Time Warner had repeatedly told ABC was unacceptable. (Exhibit U). If ABC's offer had
truly been unconditional, it would have had to extend throughout the retransmission consent
cycle, i.e., through December 31, 2002. Moreover, as an "unconditional" offer, it would have to
be viewed as affording Time Warner complete discretion in deciding whether, how, where and
when to carry the ABC O&O Stations.
Time Warner also reminded ABC, as it had advised ABC when a similar situation arose
during the February sweeps, that Section 76.58(a) of the Commission's rules cannot logically
apply after the expiration of a retransmission consent contract. Time Warner further noted that a
unilateral offer of retransmission consent was invalid, and that the ABC O&O Stations waived
their right to unilaterally mandate carriage when they elected retransmission consent instead of
must carry. In addition, Time Warner reminded ABC that the expiration of the retransmission
consent agreement during an ongoing sweeps period was due solely to the fact that ABC insisted
on such expiration date in the previous extension agreement, just one month earlier. Time
Warner again renewed its offer of a reasonable retransmission consent agreement that would
guarantee the ability of Time Warner subscribers to continue to receive the ABC O&O Stations
through the end of the year, while the parties continued their negotiations in a less highly
charged atmosphere.
ABC's response to Time Warner's letter came late in the evening on April 30 and simply
confirmed that ABC's position was unshakable - - it would not consider agreeing to give Time
Warner retransmission consent for any period longer than the May sweeps. (Exhibit V). Time
Warner replied, expressing its regrets as to ABC's decision, and offered to stay by the phones in
case ABC had a change of heart. (Exhibit W). ABC's call never came.
By refusing to agree to Time Warner's reasonable, good faith offer of an extension
through the end of the year, when the stroke of midnight on April 30 arrived, ABC ensured that
there was no longer any retransmission consent agreement in place, and, like the fabled carriage
that turned into a pumpkin, Time Warner's carriage authority with respect to the ABC O&O
Stations vanished.
ARGUMENT
I. Section 325(b)(1) Prohibits Time Warner From Retransmitting The ABC O&O
Stations Following The Expiration of Time Warner's Retransmission Consent
Agreement With ABC.
Section 325(b)(1) of the Communications Act makes it unlawful for a cable television
system to retransmit the signal of any local commercial television broadcast station that has
elected to exercise its retransmission consent rights, in lieu of its must carry rights, without an
express agreement between the station and cable system authorizing such retransmission.
Section 325(b)(1) provides, in relevant part, as follows:
(b)(1) Following the date that is one year after the date of enactment of the Cable
Television Consumer Protection and Competition Act of 1992, no cable system or
other multichannel video programming distributor shall retransmit the signal of a
broadcasting station, or any part thereof, except - -
(A) with the express authority of the originating station; or
(B) pursuant to Section 614, in the case of a station electing, in accordance with this
subsection, to assert the right to carriage under such section.
The FCC rule implementing this statutory section similarly states that "no multichannel
video programming distributor shall retransmit the signal of any commercial broadcasting
station without the express authority of the originating station." 47 C.F.R. 76.64(a). As noted
above, the retransmission consent agreement between ABC and Time Warner unquestionably
expired at 12:01 am, May 1. After that moment, Time Warner had no choice but to suspend
retransmissions of the ABC O&O Stations. To have done otherwise would have exposed Time
Warner to severe penalties, both under the Communications Act and for copyright infringement.
Specifically, the FCC has clearly stated its authority and its intent to punish violations of
the retransmission consent provisions, noting that "properly documented retransmission of a
television signal without consent would be grounds for imposition of a forfeiture." Initial Must-
Carry Order at 175. Furthermore, under Section 111(c) of the Copyright Act of 1976, 17
U.S.C. 111(c), cable operators are eligible for a "compulsory" copyright license, and thus
immunized from copyright liability, in connection with the carriage of certain broadcast signals,
so long as the statutory criteria (including the payment of appropriate compulsory license fees)
are satisfied. However, Section 111(c)(2) goes on to provide that:
the willful or repeated secondary transmission to the public by a cable system of a
primary transmission made by a broadcast station licensed by the Federal
Communications Commission... and embodying a performance or display of a
work is actionable as an act of infringement under section 501, and is fully
subject to the remedies provided by section 502 through 506 and 509, in the
following cases:
(A) where the carriage of the signals comprising the secondary transmission is
not permissible under the rules, regulations, or authorizations of the Federal
Communications Commission; ...
The Copyright Act provides substantial penalties for infringement, including statutory
damages of between $750 to $30,000, and up to $150,000 in the case of "willful" infringement.
Section 506 of the Copyright Act also provides for criminal penalties including fines and/or
imprisonment in cases where the infringement is made "willfully and for purposes of
commercial advantage or private financial gain..."
Finally, and not insignificantly, the Copyright Act provides standing to bring an
infringement action not only to the broadcast station whose signal has been unlawfully
retransmitted, but to the legal or beneficial owner of the copyright covering any of the
programming broadcast by that station. Thus, even if ABC were estopped from bringing an
infringement action against Time Warner on account of its "unilateral" offer of retransmission
consent, the continued retransmission of the ABC O&O Stations absent an effective agreement
conferring the necessary consent under Section 325 of the Communications Act would
nevertheless expose Time Warner to considerable copyright liability from the owners of the
multitude of copyrighted television programs broadcast by the ABC O&O Stations.
II. Section 614(b)(9) Has No Applicability Upon The Expiration Of A Retransmission
Consent Agreement.
ABC argues that, despite the admitted fact that there is no enforceable retransmission
consent agreement between it and Time Warner, and despite the fact that Time Warner would be
exposed to substantial liability under both the Communications Act and the Copyright Act if it
had continued to carry the ABC O&O Stations after the expiration of the retransmission consent
agreement at 12:01 am on May 1, Time Warner's decision to comply with Section 325(b)(1)
constituted a violation of Section 614(b)(9) of the Act.
As will be shown below, plain statutory language dictates that Section 614(b)(9), and all
other provision of Section 614, are simply inapplicable to a station electing retransmission
consent. And, it is not at all clear that the Commission has ever actually decided whether the
"sweeps" clause, as opposed to the "notice" clause, of Section 614(b)(9) applies during the term
of a retransmission consent agreement.
Section 614(b)(9) provides, in relevant part, as follows:
A cable operator shall provide written notice to a local commercial television
station at least 30 days prior to either deleting from carriage or repositioning that
station. No deletion or repositioning of a local commercial television station
shall occur during a period in which major television ratings services measure the
size of audiences of local television stations.
The FCC has adopted a parallel provision as a note to Section 76.58(a) of its rules:
NOTE: No deletion or repositioning of a local commercial television stations
shall occur during a period in which major television ratings services measure the
size of audiences of local television stations. For this purpose, such periods are
the four national four-week ratings periods - - generally including February, May,
July and November commonly known as audience sweeps.
As a preliminary matter, it is important to stress that Section 614(b)(9) is subsumed
within Section 614 of the Communications Act, which deals exclusively with mandatory
carriage rights for certain local commercial television stations. Significantly, Section 325(b)(4)
of the Act states that
[i]f an originating station elects under paragraph (3)(B) to exercise its right to
grant retransmission consent under this subsection with respect to a cable system,
the provisions of Section 614 shall not apply to the carriage of the signal of such
station by such cable system.
Thus, based on a plain reading of these two statutory provisions, it is evident that the restriction
against "deletion or repositioning" during a sweeps period is simply inapplicable to a station that
has elected retransmission consent, since it is one of the "provisions of Section 614" that does
not apply when a station elects retransmission consent.
Time Warner is aware that, at 171 of the Initial Must Carry Order, the Commission
indicated that Section 614(b)(9), along with a litany of other provisions in Section 614 (
614(b)(3)(A), 614(b)(3)(B) and 614(b)(4)(A)) all apply to retransmission consent stations as well
as must carry stations. ABC asserts that the Commission did not reach this conclusion
"lightly," but rather devoted "several paragraphs" to the "explicit consideration" of why the
"prohibition against dropping a local commercial television station during audience sweeps
covered broadcast stations carried pursuant to retransmission consent agreements."
ABC's characterization of the Commission's discussion of this issue is misleading in the
extreme. In fact, the "several paragraphs" referred to by ABC ( 164-170) were devoted to the
applicability of Section 614(b)(3)(B), the "carriage in the entirety" provision, to retransmission
consent stations. The other provisions, including Section 614(b)(9), were then merely swept in
at 171, with absolutely no analysis or discussion why the policies of that section should apply
to a situation where such matters could be freely negotiated among the parties in their
retransmission consent agreement. In this regard, it is important to recognize that Section
614(b)(9) contains two separate clauses, the "sweeps" clause and the "notice" clause. The
policies of these two clauses were in fact separately analyzed in paragraphs 109 and 110 of the
Initial Must Carry Order. In 109, the analysis of the "sweeps" clause, the Commission stated
as follows:
[A]s we proposed in the Notice, the rules will prohibit deleting or
repositioning of must-carry signals during any of the four annual
sweeps periods. . . . Thus, we will prohibit the deletion and
repositioning of must-carry signals during these four time periods.
(emphasis supplied).
In contrast, when discussing the "notice" clause of Section 614(b)(9) at 110, the Commission
stated that "the notification requirements are not limited to must-carry signals alone."
Given the lack of reasoned explanation in 171, it is entirely unclear whether the Commission
intended the "notice" clause of Section 614(b)(9) to apply to retransmission consent stations, or
the "sweeps" clause, or both.
From the foregoing, the applicability of the "sweeps" clause of Section 614(b)(9) to a
station that has elected must carry is ambiguous at best. Indeed, Time Warner notes that ABC
itself does not contend that Section 614(b)(9) applies to stations being carried pursuant to a valid
retransmission consent agreement. Such an application, according to ABC, would render the
rule meaningless, because protection against being dropped during sweeps would be unnecessary
where such protection is already provided under a valid contract. Rather, ABC insists that
Section 614(b)(9) applies in one and only one situation - - where a retransmission consent
agreement expires by its own terms in the midst of a sweeps period.
The fallacy in ABC's argument is apparent when the applicability of Section 614(b)(9) to
stations electing must carry is compared to its potential applicability to stations electing
retransmission consent. There is no dispute that Section 614(b)(9) applies to local commercial
television stations that have elected must carry (affirmatively or by default). In the case of a
station being carried pursuant its must carry rights, the rule suffers from the same lack of
necessity raised by ABC with respect to its applicability during a retransmission consent contract
- - if the station is dropped during a sweeps period, the station could always rely on its must
carry remedies under Sec. 614(d). However, the rule has very significant applicability in the
case of a station that has elected must carry, but is being carried voluntarily, rather than in
fulfillment of the must carry requirements of Sec. 614, e.g., because the cable system is already
carrying its quota of must carry stations, or because the station "substantially duplicates" another
must carry station or is a duplicate network affiliate. Under such circumstances, if the station
were dropped during sweeps, its only remedy would be under Section 614(b)(9), since it is not
entitled to a remedy under must carry.
To the extent that Section 614(b)(9) applies at all to broadcast stations electing
retransmission consent, its applicability would be very similar to the must carry scenarios
described above. Where a retransmission consent agreement both authorizes and creates a duty
to carry, dropping the station during sweeps would simply provide two remedies, just as in the
case of the must carry station. It is not uncommon, however, for a retransmission consent
agreement to allow, but not mandate, carriage. Thus, Section 614(b)(9) provides the sole
remedy for deletion or repositioning of a voluntarily carried retransmission consent station
during a sweeps period under such circumstances, just as in the case of a voluntarily carried
"over-the-quota" or "substantially duplicative" must carry station.
Thus, while Time Warner disputes the legal applicability of Section 614(b)(9) to a station
that has elected retransmission consent, it is beyond dispute that there are circumstances where
such a rule might logically apply during the term of a retransmission consent agreement.
However, Section 614(b)(9) cannot logically apply to the discontinuance of carriage following
the expiration of the retransmission consent agreement that authorized carriage in the first place.
Otherwise, the rule would simply serve to extend a retransmission consent agreement beyond the
termination date freely and mutually agreed upon by both parties. It simply is inconceivable that
Congress intended Section 614(b)(9) to work such an extraordinary abrogation of private
contractual terms given the absence of either clear statutory language or extrinsic legislative
history supporting such a conclusion. Moreover, as explained above, Section 614(b)(9) speaks
only to a voluntary "deletion or repositioning" during sweeps. Upon the expiration of a
retransmission consent agreement, the cable operator has no legal authority to continue to carry
the broadcast station's signal and the discontinuation of carriage under such circumstances is
thus not a voluntary "deletion" by the operator.
Finally, and most significantly, mandated carriage under such circumstances would be
standardless, and thus unenforceable. Without a bilateral agreement as to the applicable terms
and conditions, carriage is unworkable because neither party can know the terms of carriage as
to matters such as indemnification, effects on other programming agreements for other channels
that may have been covered by the previous agreement, promotional obligations, etc. How long
would such a consent last? What other terms and conditions would apply? Would such a grant
of consent create a right for the cable operator to carry, but not an obligation to carry? Could the
broadcaster withdraw its consent at any time? These and other unanswered questions compel
the conclusion that a retransmission consent contract must be agreed to by both parties to satisfy
the requirement of Section 325(b)(4) of the Act and Section 76.64 of the Commission's rules. If
disputes arose as to such issues, it would be impossible for the Commission or a court to resolve
them. This lack of guidance clearly shows that Congress did not intend the sweeps rule to apply
after the expiration of a retransmission consent agreement.
Indeed, such open issues have a very significant impact on the matter now before the
Commission. ABC concedes, as it must, that the previous retransmission consent agreement
between the parties has expired, but ABC nevertheless seeks to compel carriage through the May
sweeps. If so, under what terms and conditions? For example, the previous agreement provided
a clause covering after-acquired systems by Time Warner and after-acquired stations by ABC. If
Time Warner closes on the acquisition of additional systems, will they have retransmission
consent from ABC, now that this issue is no longer covered by a valid contract? Even more
significantly, the prior retransmission consent agreement included an indemnification by ABC to
protect Time Warner as to tortious acts by ABC relating to "libel, slander, defamation, invasion
of the right of privacy or publicity, or violation or infringement of copyright." If Time Warner
were forced to carry the ABC O&O Stations now, it would be exposed to massive potential tort
liability, without the protection of the indemnification clause agreed to by the parties in their
now expired retransmission consent contract. Indeed, Time Warner would never agree to a
retransmission consent agreement lacking such fundamental protections, yet ABC would force
Time Warner to carry its O&O Stations and assume full exposure.
In short, if Section 614(b)(9) applies at all to stations that have elected retransmission
consent, it logically only restricts "deletion or repositioning" during the term of the applicable
retransmission consent agreement, not after such agreement has expired. This conclusion is
particularly inescapable here, where ABC knowingly and voluntarily demanded that Time
Warner enter into a short-term extension of the retransmission consent agreement which
specifically provided that Time Warner's authority for continued carriage would expire one
month later, during a sweeps period.
III. ABC Cannot Unilaterally Compel Time Warner To Carry Its Stations By Means Of
An Allegedly "Unconditional" Grant of Retransmission Consent
Although ABC's principal contention is that Section 614(b)(9) applies only where a
retransmission consent agreement expires during a sweeps period, it also argues that its alleged
grant, on a completely unilateral basis, of "unconditional" consent for Time Warner to carry
ABC's stations compels Time Warner to continue carriage of those stations for the 24-day
specified in that "unconditional" grant. ABC's position would effectively erase the distinction
between must carry and retransmission consent and, therefore, must be rejected. Indeed, ABC's
position would create three options for broadcasters: must carry, retransmission consent, and
"mini-must carry", i.e., a right to mandatory carriage during sweeps even without a valid
retransmission consent agreement. As shown below, this is not the regime Congress enacted in
establishing the must carry/retransmission consent election, and the courts have never upheld
such a "mini-must carry" scheme.
Once a local commercial station elects retransmission consent, it relinquishes any right
to mandatory carriage. Indeed, such a station runs the risk that if a retransmission consent
agreement acceptable to both parties cannot be reached, the cable operator will have no
authority to retransmit the station. Congress anticipated this scenario by noting that
Section 325 makes clear that a station electing to exercise retransmission consent with
respect to a particular cable system will thereby give up its rights to signal carriage and
channel positioning established under section 614 and 615 [the must-carry provisions] for
the duration of the 3-year period. Carriage and channel positioning for such stations will
be entirely a matter of negotiation between the broadcasters and the cable system.
Senate Report at 37.
As noted above, in establishing the must carry/retransmission consent election, Congress
intended to give local television stations a choice. Those stations fearing that their
programming might not have sufficient popular appeal to otherwise merit cable carriage were
given the ability to guarantee carriage by electing must carry. On the other hand, those more
popular stations believing that they might be able to extract consideration from cable operators
in return for the right to carriage were given the option to elect retransmission consent. Indeed,
the FCC recognized that strong television stations would welcome the opportunity to negotiate
for retransmission consent in the open market:
Strong television stations having the potential for gaining retransmission consent
revenues would forfeit their negotiating opportunities if they did not make an affirmative
election of retransmission consent.
But such stations were placed on notice that by electing retransmission consent, they
were foregoing the right to mandatory carriage for a three-year period, until the next election
cycle arrives. Thus, if they were unable to enter into a mutually acceptable retransmission
consent agreement with the cable operator for any reason, such as making overly greedy
demands for consideration or overestimating the popularity of their programming, the station
would risk not being carried by such cable system.
If a station could elect retransmission consent and then force a cable operator to carry the
station by proffering a unilateral grant of consent, the carefully balanced statutory retransmission
consent/must carry election scheme would be undermined. A station could elect retransmission
consent and then make unrealistic and unreasonable demands for consideration, safe in the
knowledge that if the cable system did not accede to the broadcaster's demands, the broadcaster
could always unilaterally offer retransmission consent for "free" and thereby guarantee carriage.
Moreover, ABC's unenforceable, unilateral offer of retransmission consent was not
unconditional in that it would give Time Warner consent only for a limited portion of the 1/1/00
- 12/31/02 retransmission consent cycle, i.e., through May 24, 2000, a condition that ABC knew
was flatly unacceptable to Time Warner.
Furthermore, a unilateral offer of retransmission consent simply does not satisfy the
requirements of Sec. 325(b)(1) of the Act or Sec. 76.64 of the FCC's rules. The process of
obtaining retransmission consent from a broadcast station necessarily entails negotiations
between the station and the cable system. Section 76.64(k) of the FCC's rules instructs that the
end result of such negotiations will be a written contract between the parties, noting that
"[r]etransmission consent agreements between a broadcast station and a multichannel video
programming distributor shall be in writing . . . ." 47 C.F.R. 76.64(k). With respect to such
negotiations, in implementing Section 325(b), the FCC stated its belief that "there are incentives
for both parties to come to mutually-beneficial arrangements." Memorandum Opinion and Order
in MM Docket No. 92-259, 9 FCC Rcd 6723, 115 (1994). However, the legislative history is
clear that by enacting the current Section 325(b) of the Communications Act, Congress intended
solely to "establish a marketplace for the disposition of the rights to retransmit broadcast
signals" and did not intend "to dictate the outcome of the ensuing marketplace negotiations." S.
Rep. No. 92, 102d Cong., 1st Sess. 36 (1991) ("Senate Report").
In sum, the ABC O&O Stations waived their right to unilaterally mandate carriage when
they elected retransmission consent instead of must carry. Nor can ABC rely on Section
614(b)(9) to compel carriage where the underlying legal basis of such carriage is an alleged
"unconditional" grant of consent. An unconditional grant must be just that - - lacking any
conditions that would impose any enforceable obligations on the recipient of the grant.
IV. ABC Fails the Tests for Extraordinary Relief.
A. ABC has Shown Neither That the Balance of Hardships Tips in its Favor Nor
That it Will Be Irreparably Injured If the Commission Fails to Order Time
Warner Cable to Carry its O&O Stations.
ABC's failure to succeed on the merits is demonstrated fully above. However, ABC also
fails the second and third elements of the Holiday Tours test, which it says applies to its
request for extraordinary relief from the Commission. The sincerity of ABC's arguments that
the balance of hardships tips in its favor and that it will be irreparably injured absent
unprecedented intervention by the Commission in these private, commercial negotiations must
be tested in light of its past conduct in the events that led up to the present circumstance. It was
ABC's decision
- - not Time Warner's - - that the most recent extension of the retransmission consent agreement
would expire in the middle of the May sweeps. It was ABC's decision - - not Time Warner's - -
to reject Time Warner's offer to extend the prior retransmission consent agreement through the
end of this calendar year. Finally, it was ABC's decision - - not Time Warner's - - to wait until
after the last minute to seek relief when it knew well in advance that Time Warner was not
going to agree any more short-term extensions.
A tribunal "may legitimately think it suspicious that the party who asks to preserve the
status quo through interim injunctive relief has allowed the status quo to change through
unexplained delay." Kobell v. Suburban Lines, Inc., 731 F.2d 1076, 1092 n.27 (3d Cir. 1984).
While such delay in seeking preliminary relief is not, by itself, determinative in whether the
grant of interim relief is just and proper, it is relevant in determining whether such relief is truly
necessary. See Miller v. Calif. Pacific Medical Center, 991 F.2d 536, 544 (9th Cir. 1993). A
plaintiff's "delay before seeking a preliminary injunction implies a lack of urgency and
irreparable harm." Oakland Tribune, Inc. v. Chronicle Publishing Co., 762 F.2d 1374, 1377 (9th
Cir. 1985).
It would be reasonable to conclude that ABC is crying "wolf" when it professes to be
irreparably injured by Time Warner's failure to carry ABC's O&O Stations, since ABC holds
the key to ending its so-called predicament by accepting Time Warner's offer to an interim
agreement lasting anywhere from five-and-one-half months to ten years, at ABC's election. In
situations where the moving party's own actions have resulted in the outcome they find
unacceptable, the court "must conclude that such an outcome is not an irreparable injury. If the
harm complained of is self-inflicted, it does not qualify as irreparable." Caplan v. Fellheimer
Eichen Braverman & Kaskey, 68 F.3d 828, 839 (3d Cir. 1995); see also San Francisco Real
Estate v. Real Estate Investment Trust of America, 692 F.2d 814, 818 (1st Cir. 1982) (harm
suffered was largely self-inflicted and, as such, "it was not only not irreparable in the absence of
the district court's order, but entirely avoidable"); FIBA Leasing Co. v. Airdyne Industries, Inc.,
826 F. Supp. 38, 39 (D. Mass. 1993) ("preliminary injunction movant does not satisfy the
irreparable harm criterion when the alleged harm is self-inflicted"); 11A Charles A. Wright,
Arthur R. Miller and Mary Kay Kane, Federal Practice & Procedure, 2948.1 (1995). Thus,
where ABC has refused to accept Time Warner's offer of an extension of their retransmission
consent agreement, it has created its own harm. Such harm is not irreparable; rather, ABC can
protect itself from the harm it is experiencing. Because a remedy other than the grant of an
injunction exists for ABC's alleged harm, an injunction is not warranted. See Caplan, 68 F.3d at
839.
Moreover, it is Time Warner that will suffer hardship if the Commission orders carriage
for another three weeks. It has been forced to explain these imminent programming changes to
its subscribers and, in accordance with the Commission's Rules, to give them a series of 30-day
program change notices to that effect. It is neither surprising nor reasonably open to criticism
that Time Warner decided to accept no more of ABC's efforts to damage Time Warner's
relationship with its subscribers due to ABC's brinkmanship and short-term retransmission
consent agreement extensions. Faced with the termination of its retransmission consent
agreement with ABC, Time Warner has taken appropriate steps to procure substitute
programming. If the Commission grants ABC's Petition, the substitute programming will be
removed for three weeks to allow ABC's O&O Stations back on the cable systems, only to be
replaced again after May 24 if there is no agreement. The Commission should not be a party to
this effort by ABC to make yo-yo's out of Time Warner's subscribers.
Finally, it is ironic that ABC, a media owner and outlet, would enlist the aid of a
government agency in compelling Time Warner to carry its O&O Stations' programming.
Unmentioned by ABC is the fact that the action it requests raises a significant issue under the
First Amendment. The Commission should recognize that, while must-carry survived a facial
Constitutional attack in Turner Broadcasting, that decision did not grant the Commission carte
blanche to dictate cable operators' program choices, even with respect to broadcast television
stations. First, the Supreme Court's prior Turner Broadcasting decision re-affirmed the
general principle that "[c]able programmers and cable operators engage in and transmit speech,
and they are entitled to the protection of the First Amendment."
Secondly, as the Supreme Court reiterated in Turner I, "Government action that . . .
requires the utterance of a particular message favored by the Government, contravenes this
essential right [that "each person should decide for him or herself the ideas and beliefs deserving
of expression, consideration, and adherence"]. Regulations that "compel speakers to . . .
distribute speech bearing a particular message" are subject to strict scrutiny and are
presumptively invalid unless they can be shown to promote a compelling interest and are
narrowly tailored to further that interest. This principle animates a series of Supreme Court
decisions striking down various kinds of speech mandated by the Government. Indeed, Time
Warner itself was involved in a situation similar to this one where a municipal government
attempted to compel it to carry Fox News Channel, a commercial news channel that Time
Warner otherwise chose not to carry. The federal court in New York that heard the case
enjoined the City of New York from taking any actions to compel such carriage.
Even if the action ABC requests is subject only to the "intermediate scrutiny" that the
Supreme Court applied to the must-carry statutory scheme as a whole, such scrutiny requires a
showing of an "important or substantial governmental interest unrelated to the suppression of
free speech, provided that the incidental restrictions did not 'burden substantially more speech
than is necessary to further' those interests." The Court identified as "important governmental
interests" the preservation of free, over-the-air broadcast television, the promotion of the
widespread dissemination of information from multiple sources and the promotion of fair
competition in the market for television programming.
None of these factors apply here. First and foremost, this mandated carriage that ABC
requests is not pursuant to the 1992 Cable Act's must-carry provisions. This is not a case of a
cable operator refusing to carry a must-carry station. This is a case of a cable operator being
legally barred from carrying a broadcast station that has formally elected retransmission consent
(and, by operation of Section 325(b)(4) of the Communications Act, that has relinquished its
must-carry rights provided by Section 614 of the 1992 Cable Act) in the absence of an executed
agreement to do so. So, one cannot say that the governmental interest being vindicated here is
merely the enforcement of the must-carry regime. The channel formerly occupied by ABC's
O&O Stations is not one for which Time Warner has been deprived of editorial control, pursuant
to must-carry or any of the 1992 Cable Act's other, similar provisions.
Second, even ABC does not claim because it cannot that the failure of Time Warner
Cable to carry its O&O Stations on Time Warner's systems in the Stations' home DMAs
threatens their existence, let alone the future of free over-the-air broadcasting. Necessarily,
when ABC elected retransmission consent over must-carry, it assumed the risk that it and Time
Warner would not reach an agreement, with the entirely foreseeable consequence that its
Stations would not appear on Time Warner's systems. At most, this proceeding is about the
timing of when that carriage ends, not about whether it will be continued indefinitely.
Third, ABC can not seriously claim that this is part of some anticompetitive scheme.
Indeed, in rejecting the facial challenge to must-carry, even the Supreme Court acknowledged,
"Broadcasters with stronger finances tend, however, to be popular ones that ordinarily seek
payment from cable systems for transmission, so their reliance on must-carry should be
minimal." As ABC implicitly recognized when it elected retransmission consent for its O&O
stations, it not Time Warner has the upper hand at the negotiating table. Were it otherwise,
ABC would have availed itself of the benefits of must-carry. Moreover, as already has been
discussed elsewhere, Time Warner's resistance is not to the idea of even provisional carriage,
pursuant to an agreement, while it continues to negotiate a long-term retransmission consent
agreement with ABC. Certainly Time Warner has not expressed an absolute refusal to carry the
Stations under all circumstances. Rather, Time Warner rejects the idea that, without an
agreement, it can be required to carry ABC's O&O Stations' for three weeks, purely for their
convenience and commercial benefit during sweeps, when there is no agreement for carriage
thereafter.
B. The Public Interest Does not Favor Compelled Carriage of ABC's O&O Stations'
Signals During the May Sweeps.
In arguing that "Time Warner subscribers will be denied the opportunity to view such
ABC programming as the Celebrity Who Wants to be a Millionaire . . .", ABC is being both
hypocritical and incorrect. It is being hypocritical because the "injury" to the public from a lack
of cable carriage of ABC's O&O Stations during a ratings period is no greater than at any other
time; yet ABC has already expressed an unwillingness to enter into an agreement with Time
Warner that maintains carriage until the end of this calendar year. While ABC says the public
interest demands that its O&O Stations' programming not be taken off Time Warner's systems
during the sweeps, it continues to reserve for itself the right to take such programming off the
day after the sweeps are over. In short, stripped of its camouflage, ABC's argument is that the
public interest requires that its O&O stations' programming be carried on Time Warner's
systems for approximately three weeks and no more. Clearly that is not the case.
ABC's television programming is not indispensable, nor are Time Warner's customers
"denied the opportunity to view such . . . programming." They simply will not see that station
over Time Warner's systems until either Time Warner and ABC execute a retransmission
consent agreement or ABC's O&O Stations elect must-carry under Section 325 of the
Communications Act. The fact is that these subscribers can watch the ABC O&O Stations by
viewing them off the air. The great majority of televisions sold in the last five years have
multiple antenna inputs that can be switched with the remote control as easily as changing
channels.
Moreover, the ABC O&O Stations are but one program source among the multiple
options offered by Time Warner. Time Warner subscribers will still have a range of choices of
news, sports, entertainment and weather from local as well as national sources. While it is
undeniable that the ABC O&O Stations make a contribution to the overall marketplace of ideas
and entertainment in their respective markets, that contribution is neither unique nor
indispensable to the public. Analytically, this situation is little different than if, in a city where
there are 50 grocery stores, one of them closed down. In that circumstance, no one would
seriously argue that the public interest required that the 50th store be re-opened; and the result
should be no different here.
Finally, the Commission should not forget that Congress, by establishing the
retransmission consent/must carry scheme of cable signal carriage regulation, clearly
contemplated the possibility that not every station that elected retransmission consent would
successfully reach an agreement with every cable company in its local market. Likewise, by
allowing broadcasters to elect retransmission consent only during a window that opens once
every three years, Congress created a situation in which it was possible for the cable-viewing
public to lose access to one or more broadcast television signals in the event a broadcaster and a
cable operator failed to reach a retransmission consent agreement. Under the regime established
by Congress -- and the Commission -- absent such an agreement, the members of the public who
subscribed to that cable company would be "deprived" of that station's signal for a period of up
to three years.
By contrast, implicit in ABC's request to the Commission is the assumption that, sooner
or later, every local station will be carried by every cable system in that station's home market --
either under must-carry or retransmission consent -- and therefore the public interest demands
that delivery of these stations' signals to subscribers not be interrupted while the broadcaster
decides just how much the cable operator is going to pay for this privilege. This assumption is
patently false. If the Congress had determined that the public interest required cable carriage of
every local broadcast television signal, then it would not have established retransmission
consent in the 1992 Cable Act. Likewise, if the Commission had determined that the public
interest required such carriage, then it would have allowed broadcasters to elect must-carry at
any time, rather than only once every three years. Under those circumstances, whenever a
broadcaster and a cable operator failed to reach agreement, the broadcaster could elect must
carry; and service to the public would continue without interruption.
It is clear that the interest that ABC is asking the Commission to vindicate here is not the
public's interest in uninterrupted cable reception of ABC's O&O Stations' programming. If this
were the interest that ABC was asking the Commission to protect, then it would ask the
Commission to order Time Warner to continue carriage of the signals of ABC's O&O Stations
indefinitely until the parties reached an agreement. Given that this indefinite extension is
clearly not what ABC desires (indeed ABC has rejected Time Warner's proffered extension to
the end of the calendar year), it is the interest of the ABC O&O Stations in maximizing their
audience
during rating period that ABC is asking the Commission to protect. While that interest may be
significant to ABC, it is a matter of indifference to the public.
CONCLUSION
ABC had many options open to it, provided by statute and FCC regulation, all of which
would have guaranteed carriage for the ABC O&O Stations during the May sweeps. It could
have elected "must carry" status last fall, but it declined to do so, choosing instead the
potentially more lucrative - - but also more risky - - retransmission consent option. It could have
agreed to Time Warner's offer to extend the expired retransmission agreement through the end
of the year, thereby guaranteeing carriage for its viewers while the parties continued to
negotiate, but it decided not to. Or, when the parties last agreed to extend the retransmission
consent through April 30, ABC could have agreed instead to an extension through the end of
May. Again, it chose to take a more aggressive tack.
ABC had every right to make the decisions it did. However, those decisions have
resulted in the parties having neither a statutory relationship - - pursuant to must carry - - nor a
contractual relationship - - pursuant to retransmission consent - - as the May sweeps proceed.
ABC can't have it both ways. Having made its election, ABC cannot now avail itself of the
benefits to which it otherwise may have been entitled, had it made different decisions.
The Commission should deny the Petition.
Respectfully submitted,
TIME WARNER CABLE
By:
Henk Brands Aaron I. Fleischman
Kellog, Huber, Hansen, Todd Arthur H. Harding
& Evans, P.L.L.C. R. Bruce Beckner
1302 K Street, N.W. Seth A. Davidson
Suite 1000 West Fleischman and Walsh, L.L.P.
Washington, D.C. 20005 1400 Sixteenth Street, N.W.
(202) 326-7900 Washington, D.C. 20036
(202) 939-7900
Its Attorneys
Dated: May 2, 2000
118361